The Biden Administration is pursuing another new strategy to increase homeownership in low-income and minority communities.
The Federal Housing Finance Agency (FHFA) is proposing two new housing subgoals under Fannie Mae and Freddie Mac’s existing single-family goals. Freddie and Fannie are government-sponsored enterprises (GSEs) and the largest buyers of mortgages.
The new subgoals set benchmark levels for purchase activity for low-income and minority census tracts for 2022 to 2024.
The proposed benchmark minority census tract goal is 10% of all single-family purchases. In order for a mortgage to qualify, the borrower must have an income at or below the area median income (AMI) and the property must be in a census tract where the income is at or below AMI and minorities make up 30% or more of the population.
“The new subgoal for minority census tracts was designed to help preserve and support affordable housing in communities of color. The subgoal benefits families at or below area median income, allowing them to stay in the communities they helped build,” said FHFA Acting Director Sandra L. Thompson. “The Enterprises’ housing goals over the next three years should support equitable access to sustainable affordable housing opportunities in a safe and sound manner that bolsters the health of communities.”
The FHFA is also proposing higher benchmark levels for existing single family goals.
Current and Proposed Goals: Percentage of overall single-family purchasesSingle-Family Goals Current Benchmark (2018-2021) Proposed Benchmark (2022-2024) Low-income home purchase goal24%28%Very low-income home purchase goal6%7%Minority census tracts home purchase subgoal (new)n/a10%Low-income census tract home purchase subgoal (new)n/a4%Low-income refinance goal21%26%
To fulfill the goals, Fannie and Freddie’s mortgage purchases must exceed the FHFA benchmark levels or the market level set by the Home Mortgage Disclosure Act (HMDA).
An ongoing effort
The Biden administration has made a priority of expanding access to homeownership for low-income, minority, and first-time homebuyers.
The administration recently increased fair housing enforcement of Fannie and Freddie through a joint effort by the Department of Housing and Urban Development (HUD) and the FHFA.
Biden is also supporting multiple bills that would provide down payment assistance to first-time and disadvantaged homebuyers.
The Down Payment Toward Equity Act of 2021 would offer up to $20,000 in down payment assistance to first-time, first-generation homebuyers and an additional $5,000 to “socially and economically disadvantaged individuals.” The First-Time Homebuyer Act of 2021 seeks to give a $15,000 tax credit – or up to 10% of the home’s price – to eligible first-time homebuyers.
Both bills are awaiting votes in the house and senate, where they are subject to changes. Meanwhile, the proposed FHFA goals will undergo a 60 day comment period before advancing toward implementation.
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